US, Mexico reach NAFTA deal, turn up pressure on Canada

Mexican President-elect Andres Manuel Lopez Obrador called Monday for a three-way trade deal with the United States and Canada, saying a two-way agreement reached with the US was just a first step. (File photo: AFP)
Updated 28 August 2018

US, Mexico reach NAFTA deal, turn up pressure on Canada

  • Negotiations among the three partners, whose mutual trade totals more than $1 trillion annually, have dragged on for more than a year
  • Trump’s economic adviser, Larry Kudlow, told reporters the deal with Mexico should serve as a “reset” for talks with Canada

WASHINGTON: The United States and Mexico agreed on Monday to overhaul the North American Free Trade Agreement (NAFTA), putting pressure on Canada to agree to new terms on auto trade and dispute settlement rules to remain part of the three-nation pact.
Auto stocks soared and the S&P 500 and the Nasdaq rallied to record highs on the expectation that Canada would sign onto the deal and ease the economic uncertainty caused by US President Donald Trump’s repeated threats to ditch the 1994 accord.
Details of gains and concessions in the deal were only starting to emerge on Monday. Trump threatened he still could put tariffs on Canadian-made cars if Canada did not join its neighbors and warned he expected concessions on Canada’s dairy protections.
“I think with Canada, frankly, the easiest we can do is to tariff their cars coming in. It’s a tremendous amount of money and it’s a very simple negotiation. It could end in one day and we take in a lot of money the following day,” Trump said.
Trump and Canadian Prime Minister Justin Trudeau discussed trade in a telephone call on Monday and “agreed to continue productive conversations,” White House spokeswoman Sarah Sanders said in a statement.
Negotiations among the three partners, whose mutual trade totals more than $1 trillion annually, have dragged on for more than a year, putting pressure on the Mexican peso and the Canadian dollar. Both currencies gained against the US dollar after Monday’s announcement.
The political stakes are high for all three countries. Trump and Republicans in the US Congress up for re-election in November want to ensure farmers and other voters whose jobs depend on trade with Canada and Mexico that the deal is sealed.
Mexican President Enrique Pena Nieto wants to sign the agreement before leaving office at the end of November, and Trudeau faces a national election expected by October 2019.
Canadian Foreign Minister Chrystia Freeland is expected to travel to Washington for talks on Tuesday. Her spokesman said Canada would sign only a new agreement that is good for the country.
Trump’s economic adviser, Larry Kudlow, told reporters the deal with Mexico should serve as a “reset” for talks with Canada.
90-day window
If talks with Canada are not wrapped up by the end of this week, Trump plans to notify Congress that he has reached a deal with Mexico, but would be open to Canada joining, US Trade Representative Robert Lighthizer told reporters.
The White House said Trump will sign the deal in 90 days. Congress has to approve it.
“There are still issues with Canada but I think they could be resolved very quickly,” a senior trade official told Reuters in an interview.
Some Republicans in Congress called the deal a positive step but said Canada must be part of the new pact.
Trudeau spoke to Pena Nieto on Sunday and shared their commitment to reaching a successful conclusion of NAFTA “for all three parties,” the prime minister’s office said.
Mexican Foreign Minister Luis Videgaray told a news conference in Washington that if Canada and the United States do not reach an agreement on NAFTA, “we already know that there will still be a deal between Mexico and the United States.”
New auto rules
The Mexico-US discussions focused on crafting new rules for the automotive industry, which Trump has put at the heart of his drive to rework a pact he has repeatedly described as a “disaster” for American workers.
Matt Blunt, president of the American Automotive Policy Council, which represents General Motors Co, Ford Motor Co. and Fiat Chrysler Automobiles NV, said the group was optimistic about the new deal, though it was still reviewing the details.
The deal would require 75 percent of auto content to be made in the NAFTA region, up from the current level of 62.5 percent, a US trade official said. A fact sheet describing the bilateral agreement specified the content would be made in the United States and Mexico.
That requirement could shift some auto parts manufacturing to Mexico from China, a White House official told Reuters, speaking on condition of anonymity.
The Trump administration said the deal improves labor provisions, in part by requiring 40 percent to 45 percent of auto content to be made by workers earning at least $16 per hour.
That measure could move some production back to the United States from Mexico and should lift Mexican wages, the White House official said.
A source in South Korea’s auto industry said many automakers would find it difficult to meet the rule on workers’ wages, which are much cheaper in Mexico. The trade minister said South Korea was analizing the deal’s impact on its auto industry.
Some Japanese automakers could face a similar challenge, but their responses on Tuesday were mostly positive.
“Toyota is pleased to hear that progress is being made by US and Mexico negotiators to reach a consensus on modernizing NAFTA,” the car maker said.
“We are hopeful that any changes are fair and balanced.”
Nissan said it was “encouraged that an agreement was reached, and hope that it appropriately considers the impact on our employees, suppliers and customers.”
The United States relented on its demand for an automatic expiration for the deal, known as a “sunset clause.”
Instead, the United States and Mexico agreed to a 16-year lifespan for the deal, with a review every six years that can extend the pact for 16 years, Lighthizer said.
Mexico agreed to eliminate dispute settlement panels for certain anti-dumping cases, a move that could complicate talks with Canada, which had insisted on the panels.
Monday’s announcement lifted equity markets in all three countries, with shares in automotive companies standing out on relief that the deal appeared to end the uncertainty that has dogged the sector for months.
General Motors Co, Ford Motor Co, and Fiat Chrysler Automobiles NV gained between 3.3 percent and 4.8 percent, while Canadian auto parts makers such as Magna International Inc. gained 4.6 percent.


Automechanika Riyadh opens, featuring leading global suppliers

Updated 25 February 2020

Automechanika Riyadh opens, featuring leading global suppliers

  • Saudi auto deals grew 40 percent last year with influx of female buyers

RIYADH: Leading names in the global auto services industry are out in force at Automechanika Riyadh — which opened on Monday at Al Faisaliah Hotel — vying to increase their share of a growing market expected to reach a value of $10.15 billion by 2023.

Automechanika Riyadh is the regional arm of the world’s largest trade fair, congress and event organizer, Messe Frankfurt, which has licensed the Automechanika brand to event organizer Al Harithy Company for Exhibitions (ACE) Group.

Mansour Abdullah Al-Shathri, vice chairman of the Riyadh Chamber of Commerce, inaugurated the trade event, which will run from Feb. 24-26.

It was revealed that Saudi auto deals grew approximately 40 percent last year, with female buyers accounting for between 10-15 percent of sales after the landmark decision to allow women to drive in the Kingdom for the first time.  

“International suppliers are stepping up their marketing for the resurgence in Saudi’s market, and this impacts the entire supply chain,” said Mahmut Gazi Bilikozen, show director for Automechanika Riyadh.

“While there is growth potential in the market, it is becoming a more competitive landscape and one which will also have to contend with evolving customer preferences. The conditions are ripe for new business relationships for those wishing to succeed in this transformative environment,” he added.

Zahoor Siddique, vice president of ACE, said: “Future vehicles will become more complex and challenging for the aftermarket industry. It is therefore imperative for manufacturers, local garages, technicians and mechanics to upskill and remain above the curve. 

 “Automechanika Riyadh is one such platform that can enable us to share and learn what the industry needs to unleash its potential.”

Two major US players — disc pad producer Giant Manufacturing and United Motors Mopar, the Kingdom’s sole distributor of Chrysler, Dodge, Jeep and Fiat cars — forecast a bullish market over the next few years.

Giant’s vice president, Eli Youssian, said he believed car sales in the Kingdom would grow by 9 percent annually until 2025, while United Motors District CEO Hassan Elshamarani expected another three million female drivers to be on the Kingdom’s roads by the end of the year.

Both Giant and United Motors launched new products at the show, with the former rolling out its new German-engineered Euro Premium Metallic Disc brake pads, and the latter introducing its Magneti Marelli spare parts.

The high potential of the new-look Saudi automotive landscape has also struck a major chord with South Korean suppliers.

The show’s Korean pavilion is hosting new-to-market entrants and existing suppliers all looking for business partners. With products from wiper blades to filters and air-conditioning parts to brake pads, the Korean contingent was positive about the Kingdom’s prospects.

One exhibitor, D Only Automotive, is looking to ring fence 10 percent of the Saudi brake market. “With more vehicles on the road, demand for brakes will increase, (so) we believe this is possible,” said President Jeon JaeWon.

Global research and analytics firm Aranca — Automechanika’s knowledge partner — has forecast that Saudi Arabia’s automotive spare parts and service market will grow at approximately 6 percent over the next five years to reach a value of $10.15 billion by 2023.

“The spare parts and service market for passenger cars alone is expected to eclipse $6.9 billion by 2023,” said Vishal Sanghavi, Aranca’s automotive practice head.